On July 15, 2014, following 14 months of House inactivity on the Marketplace Fairness Act, the Senate breathed new life into the effort to pass this legislation by combining the bill with a 10-year extension of the Internet Tax Freedom Act. The Senate majoritys decision to introduce the combined compromise package, dubbed the Marketplace and Internet Tax Fairness Act (MITFA, S. 2609), acknowledges the reluctance of House leaders to consider the Marketplace Fairness Act, while also recognizing the Internet Tax Freedom Act as a key priority of the House. As readers may recall, the Senate passed the Marketplace Fairness Act (S. 743)on May 6, 2013. Since that time, House leaders have opposed consideration of the Senate-passed bill, but have aggressively moved forward on legislation to renew the Internet Tax Freedom Act, which expires on November 1, 2014. The Internet Tax Freedom Act is current law which prohibits state and local governments from taxing Internet access. The Marketplace Fairness Act is proposed legislation that would allow state and local governments to compel retailers to collect and remit sales taxes on online sales.
Why is this legislation necessary?
Consumer failure to pay online sales and use taxes as a result of federal inaction on this issue annually results in the loss of billions of dollars per year in taxes owed to state and local governments on remote sales. For example, according to the Department of Commerce, e-commerce sales in 2005 were $87 billion, and grew by nearly 40 percent to $225.5 billion in 2012. Correspondingly, the National Conference of State Legislatures revealed last year that these sales produced approximately $23 billion in unpaid sales and use taxes in 2012.
Passing The Marketplace and Internet Tax Fairness Act would finally bring federal law into the digital age by enabling state and local governments to collect sales taxes on online purchases that are already owed to them but are not being paid, as well as level the playing field for brick and mortar retailers who are currently at a five to ten percent competitive disadvantage to remote sellers because Congress has failed to act to update national tax laws with respect to digital sales. In addition, S. 2609 would provide a temporary extension of the moratorium on state and local governments ability to tax Internet access.
Currently, there is no bill similar (companion legislation) to the Marketplace Fairness and Internet Tax Fairness Act that has been introduced in the House of Representatives. With regard to Internet access taxes specifically, the House approved a bill (H.R. 3086) earlier this year to permanently preempt the ability of state and local governments to tax Internet access. This measure was strongly opposed by GFOA and many other associations representing state and local governments. The GFOA, along with our partners at the National League of Cities, U.S. Conference of Mayors, National Association of Counties and International City/County Management Association, believes that Congress should only renew the Internet Tax Freedom Act if it is paired with the Marketplace Fairness Act.
What Can You Do To Help Enact Legislation On This Critical Issue?
GFOAs Federal Liaison Center has developed advocacy materials to assist in your outreach efforts with both your local and federal elected leaders to request their support for the Marketplace Fairness and Internet Tax Freedom Act. Please help us engage Congress on the need to pass this important bill using these materials today!
- Talking points on the bill to help you in your discussions with your local elected officials, as well as members of Congress.
- A letter from the GFOA and the other national associations representing local governments to members of the Senate, requesting that they both co-sponsor and support the Marketplace Fairness and Internet Tax Freedom Act, and urging them to vote against efforts to make the ten-year limited moratorium on internet access taxes permanent. Please consider sending a similar letter from your city or county to your Senators. Contact information for your Senators offices can be found here.
- A report prepared by the Center for Budget and Policy Priorities that discusses the significant cost impact for states and localities from a permanent preemption on their ability to tax Internet access.
- Is my Senator a co-sponsor of the Marketplace Fairness and Internet Tax Freedom Act (S. 2609) and other information about the legislation.
Beyond these resources, GFOA is working closely with other associations to advocate for the enactment of the Marketplace Fairness and Internet Tax Freedom Act. To review their advocacy resources, click on the links below.